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Customers are increasingly seeing digital banks as viable alternatives to the high-street giants.

Years of being offered pitiful savings rates, poor customer service and a lack of innovation are pushing customers to consider trying something new.

Events such as the mass disruption to TSB's services are further denting customers' trust in well established banks. TSB has more than five million customers, who have faced days with no, or intermittent, access to their online accounts, due to a problematic system change.

The new breed of banks offers features such as fee-free spending abroad, tools to track spending, and the ability to temporarily freeze a debit card instantly.

They also don't have decades of ageing systems and customer records to deal with.

Such banks appeal to younger people, who are already accustomed to relying on websites and apps rather than physical high street stores for everyday activities such as grocery shopping and ordering a dinner delivery.

But when it comes to the digital banks, there are significant differences in the services being offered.

Here are the names you should know about, what they’re offering, and the downsides to consider.

One common feature is that all of these are run solely through a smartphone or tablet application, with no physical branches.

That means you set up your account, manage your money and carry out other tasks such as ordering a replacement debit card through the app, although you can still speak to their staff on the phone.

Monzo

It’s a fully licensed bank, and deposits are covered by the Financial Services Compensation Scheme (FSCS) for up to £85,000 per customer. That means your money is protected if Monzo goes bust.

Customers get a current account that includes all normal banking functions, plus a variety of other tools.

Its key features include a spending tracker, which provides a breakdown of how much you’ve spent, where and on what, plus notifications every time the card is used. You can also set spending goals, and the app will notify you if you’re running down your account balance too quickly.

Everything is managed through the app. You can freeze your card temporarily if you’ve lost it, send money, order a new card, check your pin number and more.

New features are being added step-by-step. Overdrafts, which can be switched on and off within the app, were a recent addition. The charge is 50p per day when more than £20 is overdrawn.

You also get fee-free spending abroad, although cash withdrawal limits have recently been introduced. You get a £200 allowance every 30 days to withdraw abroad – beyond that, there’s a 3pc charge to withdraw cash.

Selling points

Largely fee-free spending abroad.

Tools to manage spending and warn about overspending.

Can replace your main bank account.

Big focus on transparency: users are consulted on changes, and the company explains every change it’s making via an online blog. Customers can also view the company’s future plans, and vote on what they want to be added next via a website called “Trello”.

Recently joined the Current Account Switch Service (Cass), making it easier to move your account to.

Revolut

Revolut operates in a similar way to Monzo. Customers get an account number and sort code to use for normal functions such as receiving a salary and making regular payments. There are also tools to analyse your spending, and notifications when the debit card is used.

A large part of Revolut’s utility right now is its travel spending and payment splitting features.

It offers fee-free spending and withdrawals abroad, and customers can hold pounds, euros, dollars and a variety of other currencies simultaneously. They can also exchange between any two of the available currencies for free.

Revolut offers the market exchange rate, which is typically slightly better than the Mastercard rate offered by the other companies mentioned here.

The payment splitting function allows you to share costs such as household bills or a restaurant meal with other Revolut users.

The firm offers a variety of other financial services via its app too. Users can borrow money using peer-to-peer loans from Lending Works, take out various types of insurance, buy cryptocurrencies such as Bitcoin, and take up various offers from partner companies. Currently, Revolut is offering £25 to users who consolidate their pensions using PensionBee.

Accessing some of these options requires becoming a “Premium” member, which costs £6.99 a month. This comes with other perks such as free spare and replacement cards and no limit on foreign exchange (currently £5,000 a month).

Revolut also offers some interesting security features. You can temporarily freeze a card and view your Pin as with Monzo. But there is also location-based security, where a payment won’t go through unless it’s close enough to your phone’s GPS location, which can be turned on or off.

Plus, it's possible to disable or enable any combination of payment methods. For instance, you could disable online transactions and swipe payments, but allow contactless payments and cash withdrawals.

It costs £5 to have your first debit card delivered, and there is a £6 charge for a replacement card. There is a top-up limit of £1,000 to £3,000 daily for new accounts.

Selling points

It offers the best exchange rate when spending abroad, and the ability to hold and switch between multiple currencies is unique.

Payment splitting tool is useful on a day-to-day basis.

Very good range of security features.

Downsides

Not a fully licensed bank yet, so no FSCS protection.

You can only withdraw £200 a month in cash with a regular account for free (£400 with a premium account) – after that there’s a 2pc charge.

Unless you want to buy additional services through Revolut or exchange large amounts of currency, the £6.99 premium fee isn’t worth it.

Starling

Starling Bank is another current account option with a full banking licence and FSCS protection.

It offers many of the features of Monzo and Revolut, including the ability to send money globally in 19 different currencies.

Starling also pays a small amount of interest on balances: 0.5pc on the first £2,000 and 0.2pc from £2,000 to £85,000.